It's the networking unit that's the source of the legal troubles for ZTE.

Last month news of a U.S. Department of Commerce inquiry into whether ZTE illegally sold embargoed equipment to Iran surfaced. The equipment in question was manufactured and/or distributed from the U.S., and hence was subject to the U.S.'s restrictions on sales to Iran, despite ZTE's global headquarters being in China, a close trading partner of Iran.

A Texas-based attorney named Ashley Kyle Yablon was hired by ZTE and was working with them on the response to the Commerce Department, but he has since turned whistleblower, according to a document obtained byThe Smoking Gun.

His testimony has implicated ZTE in trying to cover-up its business with Iran and obstructing the federal inquiry. That brought the FBI onboard, who is probing this second set of charges against the embattled Chinese phonemaker.

The plan, according to Mr. Yablon was to shred a bundle of purchase orders that clearly indicated that equipment was shipped to Telecommunication Co. of Iran (TCI). The equipment included resold units from Microsoft Corp. (MSFT), Dell, Inc. (DELL), Hewlett-Packard Comp. (HPQ), Oracle Corp. (ORCL), and other US companies.

Reutersreported that the system would be "far more capable of monitoring citizens" than any system Iran has had to date.

Relations between Iran and the U.S. have been strained by Iran's capture of a U.S. UAV flying in its airspace, and by surface reports that indicated the U.S. was infecting Iranian computers will malware in an effort to sabotage its economy/military [1][2]